-->Beware no-shows. This week the US government is due to refinance about $51bn of Treasuries as part of its quarterly funding cycle. Earlier this year, most of these bonds were gobbled up by Asian central banks, looking to park their rising dollar reserves. However, the four-week moving average of foreign central bank purchases turned negative last month, since Asian currency intervention has tailed off. While small-scale foreign purchases have subsequently resumed, what might happen if official foreign buyers do ever stay away from the auctions en masse?


A recent paper by the New York Federal Reserve is none too reassuring. It notes that Asian central banks currently have considerable incentive to diversify their reserves away from the dollar. Thus, even if they were to intervene in currency markets again this winter they might not channel all of this into Treasuries. Moreover, if foreign governments did stop buying US assets, purchases by private domestic investors would apparently need to be six times 2003 levels to take up the slack. Common sense implies this would cause a bond market collapse.


There is no indication yet that this grim situation is unfolding. In fact, US officials comfort themselves that bond prices actually rose last month, when foreigners temporarily pulled out. But that may have been a stroke of luck, coinciding with changing inflation views. Do not count on its happening again if the Asians fail to turn up in force at this month's auctions.

-->The 10-year note auction proved the least successful of the Treasury's quarterly refunding, posting a high yield of 4.280 percent that is 1 basis point above the when-issued rate at the bidding deadline and a bid-to-cover of 2.05 that was well under August's coverage of 2.90.

Note the prior 10-year auction in September was a reopening that was boycotted by non-dealers, making the August data the better comparison.

Indirect bidders, a category that includes retail accounts and foreign central banks, were awarded 40.5 percent of the auction compared to 54.7 percent at the August refunding. Only 2.9 percent of September's offering was awarded to indirect bidders.

Though results compare poorly with the unusually strong results in August, November's auction nevertheless is a success, especially given uncertainty ahead of wording in the Federal Reserve's policy statement later this afternoon.

The bond market isn't likely to react to today's results, though they do underscore the strength of demand for U.S. Treasuries -- a key plus for the economic outlook given prospects of large fiscal deficits (note October's Treasury budget data will also be released later this afternoon).

-->"Common sense implies this would cause a bond market collapse"...

Langfristig schon, aber wenn die Wirtschaft sich in den USA weiter abkühlt könnten inländische Investoren ihre Aktien verkaufen und die Gelder in den Bondmarkt investieren, dies würde die Zinsen am langen Ende sicher noch eine Weile tief halten.

Darauf spekulieren würde ich nicht, aber es gibt in jedem Fall gute Gründe sowohl den Aktien, als auch den Bondmarkt in den USA zu meiden. Zumal sowieso alle Gewinne im Dow der letzten WOche vom Dollarverfall aufgefressen wurden.

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